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The infamous Flame virus can infect even secure PCs by tricking them into believing its malicious payload is actually an update from Microsoft.

As we already know, Flame has gained traction by tapping into security certificates for Microsoft’s Terminal Server. Though they appear to be digitally signed by Microsoft, the certificates are actually cooked up by the people behind Flame, thereby tricking PCs into accepting them as legitimate.

Microsoft and Symantec revealed yesterday that the virus can up the ante by using the fake certificates to spoof Microsoft’s own Windows Update service. As such, Windows PCs could receive an update that claims to be from Microsoft but is in fact a launcher for the malware.

Symantec described the method behind Flame’s madness: The virus, also known as Flamer, uses three applications to infect PCs — Snack, Munch, and Gadget. Collectively, this trio can trick PCs into redirecting Internet traffic to an infected computer with a fake Web server,. Once infected, a PC thinks the file that loads Flame is actually a Windows Update from Microsoft.

And as Symantec explained in its blog, spoofing Windows Update is not a trivial matter.

Hijacking Windows Update is not trivial because updates must be signed by Microsoft. However, Flamer bypasses this restriction by using a certificate that that chains to the Microsoft Root Authority and improperly allows code signing. So when a Windows Update request is received, the GADGET module through MUNCH provides a binary signed by a certificate that appears to belong to Microsoft.

The unsuspecting PC then downloads and executes the binary file, believing it to be a legitimate Windows Update file, Symantec added. The binary is not the Flame virus itself but a loader for Flame.

“In all cases, Windows Update can only be spoofed with an unauthorized certificate combined with a man-in-the-middle attack,” Microsoft said. The Flame virus itself has employed a man-in-the-middle attack to steal data, listen in on audio conversations, and take shots of screen activity.

Microsoft has already taken action by issuing a Security Advisory on how to block software signed by the unauthorized certificates, releasing an update to block the rogue certificates, and cutting off the ability of the Terminal Server Licensing Service to issue certificates that allow code to be signed.

To further protect its customers, the software giant is promising to harden its Windows Update service.

“We will begin this update following broad adoption of Security Advisory 2718704 in order not to interfere with that update’s worldwide deployment,” Microsoft said. “We will provide more information on the timing of the additional hardening to Windows Update in the near future.”

Some security experts have downplayed the danger of Flame, claiming it’s not as huge a threat as feared.

“As we continue our investigation of Flame, more and more details appear which indicate our initial statement: this is one of the most interesting and complex malicious programs we have ever seen,” Kaspersky said in a blog yesterday.

Microsoft (NSDQ:MSFT) believes the iPads and Android tablets its customers are using to access Windows desktops using virtual desktop infrastructure are under-licensed, and its new Windows 8 Companion Device License aims to plug this loophole.

“When you look at the number of iPad devices in the enterprise that are basically accessing and running Windows 7, using and getting the value of the software, there wasn’t a monetization of that for us that was associated with those things,” Ross Brown, vice president of solution partners and independent software vendors in Microsoft’s Worldwide Partner Group, told CRN earlier this week.

Microsoft’s unveiling of the CDL did not go over well, as some partners and customers interpreted it as a naked attempt to slow the iPad’s march into the enterprise — understandable since Microsoft isn’t requiring it for Windows RT tablets — while others predicted it would put a damper on VDI business.

Most surprising, though, was that some people interpreted the CDL as some sort of new, hardball tactic on Microsoft’s part. Truth be told, Microsoft has always had a skittish view toward VDI, and has always been unapologetic about its Windows licensing terms.

Microsoft partners can sell hosted Windows 7 desktop-as-a-service through VDI as long as the end customer has an existing licensing agreement with Microsoft. However, partners must also have dedicated physical hosts for each customer, and this extra hurdle negates multi-tenancy and essentially renders this option moot.

What’s ironic about the hubbub over the CDL is that it actually represents a sort of compromise on Microsoft’s part. And that’s unusual, because the words “compromise” and “Windows” usually don’t occur in any conversation about Microsoft licensing.

Here’s the situation Microsoft faces: Under its current VDI licensing terms, customers who use devices not covered by Software Assurance — like iPads, thin clients, and contractor or employee-owned PCs — must buy the Virtual Desktop Access license subscription, which costs $100 per device annually.

But according to virtualization experts, many Microsoft customers are not adhering to the VDA requirement — some willingly, others because they simply don’t realize it is required.

“The complexity of licensing with respect to VDI is now such that Microsoft has effectively made it impossible for any enterprise IT manager to ensure compliance,” said Simon Bramfitt, founder and research director at Entelechy Associates, a Concord, Calif.-based virtualization consultancy.

Microsoft has no mechanism in place to remotely track whether or not they are in compliance, but some customers could be looking at much higher licensing costs if they were to face an audit.

“There are many organizations out there that have deployed VDI and do not understand the licensing, and they are all out of compliance,” said Mike Strohl, president of Entisys, a Concord, Calif.-based solution provider. “They’re not thinking about iPads and smartphones and all the extra endpoints.”

The CDL could clear things up, partners say, as it gives customers the right to access corporate desktops through VDI on up to four personally owned devices. Microsoft has not said how much the CDL will cost, but customers with large numbers of VDI-equipped iPads are obviously going to be fine with the CDL if it costs less than the VDA.

The alternative for Microsoft would be to stage mass audits of customers that use VDI with tablets to ensure compliance with the VDA. Such a move would likely be a PR disaster for Microsoft, though — one that would make the recent uproar over the CDL look tame by comparison.

Jon Roskill, Microsoft’s vice president of worldwide partner sales and marketing, told CRN earlier this week that the company will rely on customers to do the right thing. “Our whole software licensing methodology is based on trust and will continue to be,” he said.

There is no doubt that Microsoft is favoring Windows RT tablets by not requiring the CDL, but this isn’t part of a strategy to keep Appleout of the enterprise: Microsoft just

Image via CrunchBase

wants to get paid. Partners want Microsoft to get paid, too, and no one is advocating that Microsoft give Windows away for free.

According to one solution provider with nationwide reach, the issue is not whether Microsoft has a right to monetize Windows VDI more aggressively; it is the impact on the channel of having to learn yet another licensing option.

BlueStacks launched Tuesday the beta version of its Android App Player for PCs, a software tool that allows users to run Android applications on a Windows XP, Windows Vista, or Windows 7 PC.

The beta release is built off of BlueStacks’ patent-pending LayerCake technology, which enables apps written for ARM-based processors to run on x86-based desktop and notebook PCs. The company also said LayerCake allows for hardware graphics acceleration, meaning even graphics-heavy applications originally built for high-end tablets will now be compatible with PCs.

BlueStacks, a Silicon Valley-based startup founded by former McAfee CTO Rosen Sharma in 2009, eyed a market early-on for its App Player software.

“You know, first there was Angry Birds on Chrome which was a big deal, then recently Steve Ballmer stood up at CES and announced that Cut the Rope had been ported to IE9 – with BlueStacks, it’s 450,000 apps coming to Windows at once,” said Sharma, who is also CEO of the company.

The alpha version of BlueStacks’ App Player was available last year from October to December, and was used by more than a million users in more than 100 countries, the company said. During those three months, over 4.5 million apps were downloaded to PCs.

April 23, 2012 7:58 PM ET Microsoft partners are bracing for customer angst over the software giant’s new license requirement in Windows 8, which stands to raise costs for organizations that use Apple iPads and other non-Windows tablets to access virtual desktop infrastructure.

With Windows 8, Microsoft is adding a new Software Assurance option called a Companion Device License (CDL), which gives customers the right to access corporate desktops through virtual desktop infrastructure on up to four personally owned devices. SA customers who use iPads and Androids to access VDI will need to buy the CDL, but customers using tablets running Windows RT, the version designed for ARM processors, will not.

Microsoft partners who have longed for the company to adopt simpler VDI licensing terms say this latest wrinkle has ominous implications.

“There is going to be a very large uproar from corporate customers,” said Bob Venero, CEO of Future Tech, a Holbrook, N.Y.-based solution provider. “You have companies out there that already have invested millions in iPads and other tablets, and now they’re going to have to pay more to access virtual Windows desktops.”